July 4, 2015
The most tricky information you can easily receive these days comes from opinion polls. With reference to the outcome of the referendum in Greece, most polls have presented hilariously divergent results. For someone that is used and experienced in interpreting pollsters, two things are certain: one, pollsters usually shape opinion rather than presenting a voting trend; two, pollsters rarely prove to be right.
Either way, with “Yes or “No”, PM Tsipras and the SYRIZA-ANEL government have a mountain to climb. Negotiations with creditors have gone bad so far, and if we want to blame somebody for that, these are definitely the institutions. This conclusion stems from the elements of the package the government has asked for: no further austerity measures, especially affecting the most vulnerable parts of the society; a specific growth plan that will boost economic activity; a debt cut to bring back credibility in the Greek economy.
Until July 1, things were bad for the Greek government being entrapped and twisted by the creditors. But that day, the IMF released, after dealing with tremendous pressure from Eurozone and the ECB, its report on Greece’s debt sustainability. Briefly, what the IMF suggests is a debt cut of 30% on the first bailout package (2010-12), a new bailout plan of €50 billion for 2015-18, a relaxation and facilitation on Greece’s debt payments, a reform pact, lower primary surpluses. The report concluded stressing out that Greece’s debt is unsustainable and constitutes a big danger for the entire stability in Eurozone.
This report solidified PM Tsipra’s appeal and strengthens the “No” camp on Sunday’s referendum. This trend was also proved on his immense rally yesterday at Syntagma Square, Athens, where for the first time since 1974 and the fall of the King, Athens and Greece had not experienced such a massive and vibrant crowd.
Back to business;
Neither option is good for Greece.
If “Yes” prevails, even slightly, PM Tsipras will be obliged to accept the current offer from the creditors, but before ratifying it via the Greek Parliament, he will most possibly call for elections. If he loses, the new coalition government will most likely pass it through the Greek Parliament. In this case, Syriza and ANEL will prove that they did their best to come to an agreement, but they were never elected to adopt a new austerity pact that will bring more recession in Greece. But the big confusion here is the following: if Greece go to elections, it is highly uncertain if a government without Syriza will achieve majority.
If “No” prevails, with big margin, PM Tsipras will be further strengthened and even more determined to negotiate harder. At least himself and the Greek government will do so. The government is pro-European, but not at any cost. Nonetheless, this does not necessarily mean he will receive more credit from Eurozone or that a big “No” will change the course of negotiations in favor of the Greek side.
In similar respect, the Grexit scenario is always on the table and there are reports that have been prepared for such a development. Yet, in such a case, exit from Eurozone would be something completely new and difficult to handle, even with full information and advanced preparation to absorb the most of the shocks it would spark. In addition, such a scenario gathers low chances as the entire European establishment, politically and economically, will be hugely, and probably unrepairably, damaged, with spiral effects spread on the global economy. In this argument the government has put a lot of weight — the dire consequences of Grexit in the European and global market.
On the other hand, the creditors would definitely like to topple PM Tsipras and his left-wing government that becomes truly annoying and dangerously demanding -though on specific grounds and not just to ignite chaos in Greece and Eurozone. Should Greece receive a new bailout package with favorable terms and a debt cut, then other major economies with similar problems in Eurozone will seek for equal treatment. Already that the Greek referendum has sparked strong democratic reflexes on many left-wing political parties in Europe that support Syriza -like Podemos in Spain, Bloco de Izquierda in Portugal, Sinn Fein in Ireland, the Scottish Left- a possible agreement that would satisfy the biggest part of the demands of the Greek side, would define the coming years in our austerity-old and conservative Europe.
The independent variable
As ECB has become a strongly politicized institution, it is likely to take action after the outcome of the referendum. No matter what the outcome will be, ECB has its own policy, though in open line with Berlin, and it might decide to further secure the Eurosystem by imposing cuts on deposits above a certain, though relevantly small amount. Such a decision would be political -i.e. an additional pressure to the government to sign a deal or resign- but also an economic one, which is literally the protection of the European and national banking sector from continuous instability during the (re-triggered) negotiations between Greece and the creditors.
Interesting enough, we have many chapters to read until the Greek crisis ends. If it ends.
To contact the author Dimitris Rapidis:
Twitter: @rapidisDimitris Rapidis